Market analysis and segmentation

GEOG 40323

January 23, 2018

Business analytics

Doing business geographically

  • Let’s say you want to open a new franchise for your company. What do you need to know?
  • Brainstorm!

Doing business geographically

  • Activities (among others) might include:
    • Geodemographic segmentation
    • Trade area analysis
    • Analysis of competitors’ locations

Geodemographic segmentation

How segmentation works

  • Most common method for geodemographic segmentation: k-means clustering
  • Goal: to partition individual units into k groups based on attribute similarity

How k-means clustering works

  • k cluster “centers” are chosen for a given distribution of data (either a priori by the analyst or at random)
  • Points are assigned to a cluster based on proximity in data space
  • Cluster centers are then re-calculated, and points re-assigned based on proximity to the new centers
  • The algorithm “converges” when data points stop switching clusters
  • Graphical illustration: http://www.naftaliharris.com/blog/visualizing-k-means-clustering/

K-means clustering in ArcGIS

  • Available via the “Grouping Analysis” tool in the Spatial Statistics toolbox
  • Let’s try it out!

Trade area analysis

  • Analysis of characteristics of area from which a business generates a majority of its customers
  • Trade areas can be defined by:
    • Euclidean or network distance
    • Customer geography
    • Gravity modeling
    • Common sense

Business Analyst

  • Business Analyst for Desktop: comprehensive add-on to ArcGIS with detailed demographic & business data along with modeling functionality
    • Expensive!
  • Business Analyst Online: Web-based interface to Business Analyst; less functionality than BA Desktop but very intuitive
  • Let’s try it out! https://bao.arcgis.com/esriBAO/login/

Trade area analysis in BAO

Competitor location analysis in BAO